The last few years have been rocky for the economy and businesses, to say the least. The unprecedented effects of the COVID-19 pandemic, shifts in work, rising inflation, a looming recession, and the Great Resignation have created a lot of question marks for companies who want to ensure their future growth and pursue financial sustainability – with an eye to the future of society and our natural resources.
So what does it mean to have a financially sustainable business model? “Sustainability” is one of those hot words that’s tossed out like candy online. Consumers want to know if your company is sustainable before engaging with you. But how does that translate to business practices, particularly in terms of financial sustainability?
In the most basic terms, something that’s sustainable means something that can support itself long-term. It doesn’t require being propped up by added external forces without using up its resources and grinding to a halt.
To achieve this end goal, business leaders must think strategically. They must embrace looking at the big picture (and sometimes the huge picture). Leaders must consider the future and possibly social and economic upsets like the ones of the past few years.
The success of any business begins with its resources. That might be raw materials sourced from the earth. More often, it may take the form of employees whose skills add value to the company’s bottom line. As a result, sustainability is becoming a critical social and economic issue. Awareness of it – and scrutiny of companies whose practices aren’t future-forward – is growing partly because of enormous global crises.
Thinking Outside the Box When It Comes to Finance
You’ve got an excellent accounting department and CFO in place. You’ve gotten sufficient funding to get going. You’re netting sales. All of the boxes seem to be ticked. However, economics is more than balance sheets and keeping the lights on. This is especially so when you’re considering your company’s financial sustainability. Your bottom line is part of that picture, but there are other areas to consider.
You can be sure your customers and stakeholders are doing their homework on your company. They want to make sure it’s worth occasionally stopping to evaluate how your company interfaces with the world around it.
However, are you doing your homework on the companies you partner with to achieve your goals? Are you thinking about how and where you source your energy and resources and how that impacts the environment and the people who live nearby? Do you consider sustainability regarding investments and your company’s economic impact? Do you look at the long-term effects of your hiring practices and how investing in your team members can help ensure your long-term stability?
Strategies for Businesses to Maintain Their Financial Sustainability in the Face of Uncertainty
The economic and workplace changes that came with the pandemic, supply issues stemming from both the pandemic and Russia’s invasion of Ukraine, have meant changes in the way investments are behaving. As a result, it’s essential to research strategies to ensure the long-term stability of your company’s assets and plan accordingly.
There are many ways to approach the economic puzzle that ensures your company’s financial sustainability long term. These can range from partnering with nonprofits to committing to an ethical investment portfolio or donating funds or volunteer hours to further a worthy humanitarian mission close to home.
Remember also that as your business scales, your spending potentially has enormous power to influence and shape the communities, environment, and economies you interact with.
Examining those impacts and creating a strategy that channels resources away from harmful effects and toward beneficial ones may be an unconventional approach to finance, but it’s increasingly important. Without a healthy environment, economy, and communities, the wheels of the market and individual businesses quickly fall off.
Consider your product and energy sourcing.
It’s vital to look at how your business sources its materials. This is true whether you manufacture consumer goods, produce food, provide logistics solutions or preside over a content empire.
As your business scales, you will increase pressure and use of resources – energy, at the least.
Depending on the nature of your business, you could consider solutions like solar or wind energy harvesting for electricity or audit and adjust energy use in your building(s). In addition, offering remote or hybrid work options for team members whose jobs can be done offsite can translate into enormous savings in overhead costs and environmental impacts.
You may also want to consider strategic investments and partnerships that are somewhat less obvious. However, they represent no less of an investment both for your business and for the future of resources for a growing global population. The global food chain is a prime example of an area where even businesses not directly involved in food production can make a difference simply by rethinking some of their practices.
The cost of global food waste is staggering.
PURIS, a plant-based protein food manufacturer, notes nearly one trillion dollars is lost each year from global food waste and loss. They’re an example of how business practices can help reduce fiscal and material waste. They also represent an opportunity for sourcing partnerships.
One of their solutions is upcycling pea starch as part of its “commitment to the UN’s Sustainable Development Goals and environmental and social governance (ESG) targets.” This starch is available as a functional ingredient for foods, as well as health and beauty products.
Another global company that’s leading the market in terms of sustainable development is HuskeeCup. The company was concerned about the enormous waste produced in the production of coffee beans; the husks created volumes of waste. So the company worked with scientists to develop a polymer coffee cup using these husks. As a result, the cups can be reused and exchanged at participating coffee shops, reducing the need for disposable takeaway cups and reducing industrial waste.
Keeping abreast of innovative solutions to waste can open up possibilities for partnerships and unexpected sourcing options that might mean cost savings for your company and stakeholder loyalty. And, of course, everyone feels good about helping solve the significant issues we face together in the 21st century.
Look at how you invest in your people.
You may not think of your employees as an investment, but maybe you should. The trend of attracting labor at the lowest rate available has started to backfire as remote and flexible work options open up opportunities. Talented employees can be lured away from a less-than-stellar compensation package and the perception that their employer doesn’t value them.
Employees create value for your business. Consequently, your hiring and retention strategy can make or break your fiscal health long term.
Sustainable management practices can translate to loyalty, increased productivity, and increased value with upskilling and growth. Cheap labor practices result in costly turnover and reduced productivity. They could lead to a significant loss of value in the long term.
You might approach an investment in labor by thinking about it like this. First, you hire Mark as an administrative assistant. Then, if Mark sticks around for five or ten years, he will know your company and his role inside out.
Mark may anticipate and resolve issues before they begin. He may take advantage of educational and development opportunities and grow his skills. He might even transfer into another role and mentor new hires. Unfortunately, the longer Mark sticks around, the more potentially valuable he becomes, and the more expensive and stressful it becomes to onboard a replacement.
Sustainable hiring is about more than dollars and cents.
Sustainable hiring and management practices go beyond simple compensation and retention strategies. It’s essential to examine how you do things to ensure you’re not unintentionally excluding potential rockstars. You can do this by adopting practices like providing pay ranges in job postings to help even the playing field and communicate fairness and openness to potential hires.
You could also adjust existing employee compensation if new hires negotiate better rates. This will encourage loyalty and increased productivity from your appreciative team. Related to that, look to current team members when leadership roles open up and make sure there’s room at the table for diversity and inclusion.
Consider the impacts of inflation on your team members and their lives. If their personal finances are pinched, it’s going to be more difficult for them to maintain focus and be productive.
Suppose you haven’t increased your employees’ salaries to adjust for the inflation of the past two years. In that case, you may have unintentionally given them pay cuts, given the skyrocketing costs of consumer goods. This could translate to increased turnover and the expense of onboarding new hires.
Other sustainable strategies for hiring and retaining a fantastic team include offering flexibility for work-life balance, innovative benefits packages, bonuses, team-building options, and opportunities to learn new skills and grow within your organization.
Five Tips to Commit to Financial Sustainability
Any savvy business leader is eyeing sustainable business practices right now and seeking education on making money for your business and ensuring your longevity and success. Here are a few tips you can put into practice right away to future-proof your company.
1. Offer remote and hybrid work options where possible.
This is a surprising one for many business leaders. However, a short time with some spreadsheets will likely reveal enormous savings in overhead for your company, at the least. You’re also likely to see increases in productivity from team members who are better able to manage their health and work-life balance – and who will likely stick around long term.
2. Source energy and other materials and goods ethically.
Look at how you source your materials, whether those materials are physical goods or energy. Next, consider your carbon footprint and consider strategies for reducing any negative impacts, from green energy sourcing to partnering with suppliers dedicated to reducing waste.
3. Commit to an ethical investment strategy for your company.
Your investment portfolio should work for your long-term success. So manage it with an eye to how your scaling investments shape the economy and contribute to communities, the environment, and the economy.
4. Work with nonprofits toward policy change, or give time or money.
You could partner with a nonprofit to work on policy strategies to benefit your local community. Alternatively, you might favor an environmental cause as you source materials and other resources for your business. You can also take the traditional route of donating some of your profits to a good cause. Many prefer volunteering with their team members.
5. Invest in your most valuable resource: your team.
Long term, your employees are among your most valuable assets.
Audit your hiring methods to ensure they are ethical and not exclusive. Make sure they offer team members opportunities to develop and grow. You might even consider offering new roles to former employees if economics forced layoffs in the past.
You may be rethinking your business strategy across the board in the face of current economic and social forces. Additionally, the effects of the pandemic blindsided many. You’ll want to ensure that you’ve prepared yourself to weather future disruptions. Some thought and planning can help you ensure your long-term financial sustainability.